Comments

In the context where development and poverty reduction are envisaged as being achieved through inclusive economic growth, the problem with mega projects is not just that they are expensive and risky, but that they generally lead to growth processes that exclude those who we expect to benefit.We need new approaches to delivering finance - for both public and private investments - to where (and to whom) it is needed - and in the dimensions and at the scale required. Inclusive growth and equitable economic transformation in developing countries requires us to be able to deliver multiple and widespread investments that are individually small in scale, but which together deliver a large and systemic impact. The traditional approach of using small numbers of large scale investments, public or private, on its own will not work.

Inclusive transformation needs multiple small scale and local investments, both public and private – not a few mega-projects.

For example, access to energy is a key driver of poverty reduction and economic participation. Providing the bulk of rural households with the ability to run a couple of light bulbs and charge a mobile phone will do more for inclusive growth than ensuring uninterrupted supply for a gold mine or an up-market suburb in a major city. Renewable technologies (particularly solar and hydro) offer the possibility of providing energy to people who currently have little prospect of being served by national grids and big power stations. However, this requires multiple small scale investments - maybe thousands of local schemes or millions of household systems, instead of one or two large scale hydro dams. This means we need to be able to change the way we deliver energy infrastructure investments. As well as the ability to finance large infrastructure projects, we now need systems through which households can access and repay finance for domestic energy systems and which local entrepreneurs can use to invest in the capacity to supply and service them.

The same is true for roads. Large projects on trunk roads are more attractive, high profile and easier to finance and deliver. But multiple small scale investments in rural feeder roads will deliver much greater returns in poverty reduction and in diversified, broad based and inclusive growth. This requires decentralized systems for public infrastructure investment but also local level access to credit and investment finance and business support services so that local contractors have the capacity to build and maintain local roads and to employ local people.

Similarly increasing the productivity of smallholder production and adapting smallholder livelihood systems to be more resilient to climate change needs financial support to R&D and investment to be available at the local and household level where the technological development and the investments will take place. We need mechanisms to ensure that climate change finance is delivered to rural people and households who are the ones that directly face the costs and risks of adopting new technologies.

Poor and economically excluded people are unlikely to be the beneficial owners of large scale mega-project type investments. Economic Inclusion in poor developing countries means that the people we want to include in inclusive growth need to be the investors in that growth and the owners of it.

To a large extent, the type and source of private investment determines the extent to which the resulting growth is inclusive. The key to inclusive growth in key livelihoods and poverty reducing sectors, like agricultural production, is to stimulate and support investment by those living and working in the sector.

Actions to promote private investment need to focus more on domestic investors, especially the small-scale and household investor involved in production, processing and trading. The potential scale of investment that could be mobilised from these “bottom of the pyramid” investors is significant. In Tanzania, for example, there are some 3.6 million rural farming households, a $120 extra investment in agriculture (the approximate cost of inputs for one acre of maize production) by each household would yield $430 million annually. These are the types of investors we need to encourage. It is their specific needs and constraints we need to address as we create the enabling environment for investment.

Institutional investors and foreign direct investment can mobilise very large sums. But significant inflows of external investment into agricultural production do risk creating competition for resources, such as land and water, and skewing public expenditure priorities towards large scale investments. In the wrong policy and institutional contexts the agricultural transformation that they deliver may well be exclusionary. On the other hand, external investment that is focused on value addition and on filling critical gaps in agricultural value chains, rather than on agricultural production and on gaining access to resources and productive assets, can play an important catalytic and supportive role in delivering inclusive rural growth and transformation.Read more

The punch lines from various references are references are very impressive. But what is the overall proposition of this piece of research ? Are you suggesting the Mega Projects should not be taken up at all? Or is that because they are "Mega" we should not develop ? Or is it that they are being developed on PPP model through private money we should not take it up ?If these projects are not implemented the lack of available infrastructure/service is going to pinch the poor the most (say e.g. healthcare project or even a power distribution to remote areas)If, as per this column, private sector is the worst candidate to rely on, are we sure the government sector is more fit ? The history has shown otherwise. It is the lack of government's will power or wherewithal which necessitated emergence of PPP model. Contrary to the conception, it is profit seeking motive which has helped bring in efficiencies not only in construction but also in operations and management of these projects. As regards to the time and cost overruns, mis-management of public sector projects/programs has made entire public sector's holy cause notorious.

Instead of broad brushing the private sectors involvement as un-fit it is time for us to do a fact finding on the "Only Government" way of developing these projects.

Lets be open for both schools of thoughts to development and arrive at more practical models.

Thank you, Kiran, for your thoughtful response. We are in favor of infrastructure that is "appropriate scale" for democratically determined purposes, wherever and however that is possible. We see that - at multiple levels - the quest to scale-up PPPs and bundle them into investment portfolios lacks key norms other than those protecting investors. At the G20, there are repeated failures to introduce normative thinking. This failure is more dangerous than the scale or the financing modality in my view. Regards, Nancy Read more

Vehemently disagree. Profit is a much better measure of what benefits people and of what they really need and want than are votes or socialist professorial elite opinions. And financial cost is a far better measure of what is truly harmful than are the opinions of environmental jihadists. Read more

Not going to happen - the iron law of return on investment for shareholders will let contractors buy politicians... and so the cycle will continue until every last resource is consumed in the name of profit. Of course, there are ways to stop this, but they require a change of thinking, so first everyone must suffer a great deal before alternatives can be examined. Read more

Nancy, very interesting piece but as we found at BNamericas in researching the largest current projects in Latin America,current cost overruns exceed $130bn. Our results agree with research by Bent Flyvbjerg and we are committed to continuing to track the performance of existing projects in the region.

The reality is that estimates are unreliable, many projects receive the go-ahead were perhaps they shouldn't and lessons are not being learned.

If lessons are not learned, investment will continue to be allocated incorrectly and inefficiently, thereby proving counter productive to efforts to improve infrastructure. Read more

I always welcome progress in health sector, but so far Natural remedies, weight loss, lifestyle, diet, and exercise are proven to be much more effective than drugs for prevention and treatment of diseases. The best resource so far I have discovered is the "Master Activator Revolution" book (http://25days.org/health/master-activator-revolution-review-a-real-solution/), which will helps improve organism's overall health, prevent and treat many major diseases such as diabetes, arthritis, alzheimer's, osteoporosis and so on. I am a living example of it, cured type 2 diabetes with lifestyle changes and taking natural nutrition suggested in that book. There are other natural healing options available such as honey bee milk but this is the most effective solution I have dealt with.Read more

PS On Air: The Super Germ Threat

NOV 2, 2016

In the latest edition of PS On
Air
, Jim O’Neill discusses how to beat antimicrobial resistance, which
threatens millions of lives, with Gavekal Dragonomics’ Anatole Kaletsky
and Leonardo Maisano of
Il Sole 24 Ore.

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